The Texas Deed of Trust

Deed of Trust TX

A Deed of Trust in Texas transfers title of real property in trust. It is the equivalent to a mortgage used in other states and provides a secured interest for a lender against real estate. It is often used as part of a real estate transaction that includes a Warranty Deed with a Vendor’s Lien and a Promissory Note. This article will discuss the common elements of a Texas Deed of Trust.

Important Terms to Know

One of the more challenging aspects of drafting a Deed of Trust is the potential to use terms and labels incorrectly. Therefore, understanding and applying the following terms correctly is critical:

  1. The Grantor is the person who owns the land in question and is granting the security interest in real property; Since the Grantee in the Deed is also the Grantor in the Deed of Trust, doublecheck to ensure that the name of the Grantee in the Deed matches the name of the Grantor in the Deed of Trust. Confusing these two terms is a common and costly error.
  2. The Grantee, also known as the Beneficiary, is the person identified in the Deed of Trust as receiving the security interest in land. The Grantee may be a bank or another third-party lender furnishing part of the money for the land sale, or the Grantee in a Deed of Trust may be the Grantor in a Deed (owner financing scenario).
  3. The Trustee, usually chosen by the lender, is the person who represents both the Grantor and the Grantee (Beneficiary) if there is a default under a Deed of Trust. When no specific trustee is required by the lender, someone willing and able to hold a foreclosure sale if necessary may be selected. However, an attorney that represents the borrower should not name himself as trustee to avoid a conflict of interest.

A Deed of Trust also includes clauses and information such as the Confidentiality Notice, identity of the parties, description of the indebtedness, legal description of the land conveyed in trust as security for the indebtedness, granting clause, grantor’s obligations, beneficiaries’ rights, trustee’s duties, and other general provisions.

Given the difficulty with accurate labels and the legal complications which can result from vague and incorrect language, using a qualified real estate lawyer is an essential part of a smooth real estate transaction, especially when a Deed of Trust is required.

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